Most franchisors understand that franchisees are responsible for their own employees, and that a specific benefit of this arrangement is that it protects the franchisor from employment-related obligations to the franchisee’s employees. Many franchisors believe that the arrangement completely insulates them from such risk. However, under Canadian law, a franchisor can sometimes be treated as an employer of a franchisee’s workers.

This concept is known as the common employer doctrine. It does not just apply to the franchisor and franchisee relationship, but with any work arrangement involving multiple employers who may exercise control over the same  workers. When it applies, a worker may be able to pursue employment-related claims against both the franchisee and the franchisor.

While these cases are highly fact-specific, franchisors should understand the types of involvement that can increase legal risk.

What Is a Common Employer?

Canadian courts recognize that an employee may have more than one employer at the same time. In certain circumstances, related businesses can be treated as a single employer for employment law purposes. The analysis focuses less on corporate structure and more on the reality of the working relationship.

Courts will often examine whether multiple entities exercise significant control over a worker or operate in a way that suggests they jointly employ that worker.